Prop 1 defeat triggers talk of legislative intervention for Uber, Lyft

The fallout from Austin’s rejection of Proposition 1 began to come into focus Sunday, as Lyft and Uber pressed on with their plans to pull out of the city and some state Republican lawmakers threatened legislation to undo the regulations that city voters just upheld.

Nearly 56 percent of voters on Saturday rejected Proposition 1, a stunning defeat for Uber and Lyft, which had poured $8.6 million into making this the most expensive election in Austin’s history. The political arm of the ride-hailing giants outspent a coalition of anti-Proposition 1 neighborhood groups and labor unions by a ratio of 50-to-1, only to lose the election by nearly 12 percentage points.

“I fully expected a pretty big win” for Lyft and Uber, said James Henson, the director of the Texas Politics Project at the University of Texas. “You can talk about the merits of the case, but it’s hard to not look at the breadth of the money being spent and the voter contact being made, and not feel like they had a pretty significant advantage.”

The results keep in place the ordinance that the City Council approved in December, which requires drivers with ride-hailing apps to undergo fingerprint-based background checks by Feb. 1, 2017, instead of using the name-based checks that Uber and Lyft prefer. The city’s ordinance also prohibits drivers from stopping in traffic lanes for passenger drop-offs and pickups, requires “trade dress” to identify vehicles for hire, and imposes a variety of data reporting requirements on the ride-hailing companies.

As the extent of the drubbing became clear Saturday night, Lyft initially seemed to tone down its pullout ultimatum, describing its promised departure as “pausing operations” instead of a “shutdown,” as it had Thursday. A spokeswoman later said there was “no shift at all.”

Both it and Uber have threatened to leave Austin if voters rejected Proposition 1. Lyft has said it will stop operating in Austin at 5 a.m. Monday; Uber said it will do likewise at 8 a.m. Monday.

Austin Mayor Steve Adler said Saturday night that he was hopeful that Uber and Lyft would sit down and begin negotiating with the city again. Adler spokesman Jason Stanford declined to comment on such talks Sunday.

Uber and Lyft made their big stand in Austin while talk of similar regulations is bubbling up in major cities across the country, including Chicago, Los Angeles and Atlanta. The companies’ big spending on Proposition 1 left many observers convinced they were using the Austin referendum to send a message to those cities and others that might be eyeing tougher rules.

Ratcheting up the pressure further, Uber recently threatened to leave Houston, which requires drivers to be fingerprinted, be drug-tested and undergo a physical before they can drive for the service — requirements far beyond those imposed by the Austin City Council in its December ordinance that Proposition 1 would have overturned. Lyft does not operate in Houston.

Both companies have already left Corpus Christi and Galveston, which passed laws early this year requiring fingerprint-based criminal background checks. And they briefly pulled out of San Antonio last year over a similar law, returning only after the Alamo City made fingerprint checks optional.

Houston Mayor Sylvester Turner issued a statement late Saturday applauding Austin voters “who stood by their mayor and city council in support of background checks for Uber drivers.”

But the outcome of the election brought criticism from other corners of the state, with some Republican lawmakers promising legislation that would overturn the city’s fingerprinting regulations.

“Local control turns to local tyranny again in Austin,” tweeted state Rep. Matt Rinaldi, R-Irving. The Legislature “needs to intervene.” He later added that City Council members “will have blood on their hands.”

State Sen. Charles Schwertner, R-Georgetown, put out a statement Sunday afternoon promising to file a bill addressing ride-hailing rules.

“It has become increasingly clear that Texas’ ridesharing companies can no longer operate effectively through a patchwork of inconsistent and anti-competitive regulations,” Schwertner said in a statement. “Any legitimate safety or liability concern regarding ridesharing clearly deserves to be addressed, and I welcome all parties to engage productively in that discussion.”

He added: “But as a state with a long tradition of supporting the free market, Texas should not accept transparent, union-driven efforts to create new barriers to entry for the sole purpose of stifling innovation and eliminating competition.”

His statement cited the importance of ride-hailing firms to residents in his district, which includes portions of far North Austin that lie in Williamson County. Voters there also rejected Proposition 1, but by a narrow margin, with 51 percent voting against the ballot measure.

Proposition 1’s victorious foes slammed the move as an attempt to do an end run around the results of an election the ride-hailing companies lost soundly.

“They’re all for local control, unless it’s not their local control, and then they show their hypocrisy,” said David Butts, the political consultant who helped lead the anti-Proposition 1 campaign, Our City, Our Safety, Our Choice.

Schwertner’s effort might receive a cool reception in the Texas House, where regional delegations hold more sway.

“We have to deal with what the public has been saying, and so far the public has been saying we want it a little different way than Uber and Lyft have presented it,” said state Rep. Joe Pickett, D-El Paso, who chairs the House Transportation Committee, which would probably hear any such bill. “Maybe the state Legislature says, ‘We’re going to let cities decide.’ Wouldn’t that be the most minimal thing that state government could do?”

The ride-hailing giants also turned to the Legislature in 2015, seeking relief from Houston’s new regulations. That effort backfired for the companies after the bill left Pickett’s committee with the proviso that fingerprint-based checks would be included. Ultimately, the bill stalled.

Filings with the Texas Ethics Commission, reviewed by the American-Statesman, show that Uber hired 28 lobbyists that year.

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